Finova Capital, a Jaipur-based non-banking financial company (NBFC) specializing in loans for micro, small, and medium enterprises (MSMEs), has successfully raised $135 million in a Series E funding round. The latest investment round features participation from notable investors including Avataar Venture Partners, Sofina, Madison India Capital, and existing investor Norwest Venture Partners. This capital infusion aims to support the company's growth strategy by expanding its loan book, enhancing technology, and broadening its geographic reach.

Funding Details and Investor Insights

The recent funding round not only underscores the confidence of new investors in Finova's mission but also provides a partial exit for some of its early backers. Since its inception in 2015, the company has successfully attracted a total of $259 million in funding, with its previous round raising $65 million in 2022. The involvement of prominent investors reflects the growing interest in the fintech sector, particularly in solutions that address financial inclusion for underserved markets.

Mohit Sahney, the founder and managing director of Finova Capital, expressed his enthusiasm about the new investments, stating, "We are thrilled to have tech-focused global investors show their faith in what we are building at Finova. Their belief in our ability to enable financial inclusion across the country invigorates our commitment to building one of India’s largest tech-led financial services companies."

Strategic Plans for Growth

Finova Capital plans to deploy the newly acquired funds primarily to expand its loan offerings, invest in advanced technology, and enhance its operational footprint. The company aims to serve a growing number of MSMEs, particularly in semi-urban and rural areas, where access to credit remains limited. With current assets under management pegged at ₹3,000 crore, Finova has seen impressive growth, reporting a five-year compound annual growth rate (CAGR) of over 60%.

Finova specializes in providing business loans ranging from ₹3 lakh to ₹25 lakh, catering specifically to MSMEs that often struggle to access traditional banking services. As of now, the company operates more than 400 branches across 16 states, having served over 100,000 customers. Its commitment to financial inclusion is further strengthened by the fact that only 14% of India’s 64 million MSMEs currently have access to formal credit, revealing a substantial market opportunity.

Financial Performance and Market Position

In the financial year 2024, Finova Capital reported a consolidated profit after tax of ₹151.5 crore, marking a 71% increase from ₹88.4 crore in the previous year. Revenue from operations rose significantly by 59% to ₹529.3 crore, up from ₹332.6 crore in FY23. Such robust financial performance positions Finova as a key player in the rapidly evolving lending landscape, demonstrating its strong underwriting and origination capabilities.

Anirudh Singh, a partner at Avataar Venture Partners, highlighted the remarkable execution capabilities of Finova’s founders, Mohit and Sunita Sahney. He noted, "The entire team has demonstrated tremendous execution capabilities to build a technology-driven platform that is highly profitable and has grown 7x in the last four years."

Industry Context and Future Outlook

The funding comes at a time when the MSME lending space is witnessing increased investor interest. Several other fintech companies, such as FlexiLoans and Aye Finance, have recently secured substantial funding, indicating a vibrant ecosystem for lending solutions tailored to small businesses.

The Reserve Bank of India is also actively working to enhance credit access for rural and small businesses through initiatives like the Unified Lending Interface platform. This move aims to address the unmet credit demand in the agricultural and MSME sectors, further underscoring the need for innovative financial solutions.

According to market analysis, India’s lending technology market is projected to reach $1.3 trillion by 2030, with a significant credit gap for MSMEs estimated at $530 billion. This highlights the importance of companies like Finova Capital, which are dedicated to bridging the credit gap and empowering entrepreneurs across the country.

Finova Capital’s successful funding round marks a significant milestone in its journey towards becoming a leader in the tech-driven financial services sector. With a clear strategy for growth and a commitment to financial inclusion, the company is well-positioned to capitalize on the expanding opportunities within the MSME lending space. As it looks to enhance its offerings and geographic reach, Finova is poised to make a substantial impact on the financial landscape, enabling countless entrepreneurs to realize their business aspirations.